JSW Steel to drastically reduce iron ore imports in FY16

Domestic output pegged at 170 mt as many mines reopen in Odisha, Goa, Karnataka

Low-cost steel manufacturer JSW Steel is planning to slash iron ore imports as the domestic production is set to increase in FY16.

The company is looking to restrict imports to around four million tonnes this year as it plans to source the raw material from the e-auctions in Karnataka and Chhattisgarh to feed its furnaces in Karnataka, Maharashtra and Tamil Nadu. “Our requirement is around 21 million tonnes this year. We are expecting the availability of 17 million tonnes from Karnataka. The rest of the requirement will have to be imported,” Vinod Nowal, deputy managing director, JSW Steel, told Business Standard.

The company plans to achieve 9.5 million tonnes of saleable steel from its Vijayanagar steel plant in Ballari district of Karnataka. It plans to produce 12 million tonnes of steel from its three manufacturing plants - seven per cent more than last year’s figure. JSW Steel’s other two plants are located at Dolvi in Maharashtra and Salem in Tamil Nadu. The combined capacity of all three plants is 14.3 million tonnes a year.

“Sourcing four million tonnes will not be a problem. Basically, we are not interested in importing this year. We will see the situation in Karnataka as to how it manages to augment production this year and then take a call on imports,” said Nowal, adding that the company would decide by August-September on how much to import this year.

M V S Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel, added: “We had an opening stock of 1.6 million tonnes of very high-grade imported ore at the beginning of this year, which was sufficient for two months as we blend it with low-grade ore. This year, we are also exploring options of sourcing from other states to tide over the shortage.”

In 2014-15, JSW Steel was the largest importer of iron ore. It imported high-grade ore from Canada and South Africa, among other countries. It had initially planned to import six million tonnes, but later increased it to around 10 million tonnes as ore prices crashed in the international market to $50 a tonne. India imported 15.5 million tonnes of the commodity last year, an all-time high.

For the current year, the prospects of domestic production are very encouraging as major producing states Odisha and Karnataka are set to increase their production to take the total production to around 170 million tonnes, 17 per cent more
than last year.

 

It is expected that Odisha is likely to produce 70 million tonnes of iron ore in 2015-16 compared to 45 million tonnes last year. Major producers such as Rungta and Sirajuddin have got environment clearance for fresh blocks.

In Karnataka, the government has taken the steps to increase the production to 25 million tonnes in FY16, compared to 19 million tonnes last year. Among the new mines that have started production are Sesa Sterlite, which has the largest capacity of 2.3 million tonnes a year and Mysore Minerals.

Together, these two companies are set to add four million tonnes. Besides these two states, Chhattisgarh is also increasing its production to 33 million tonnes as NMDC is commencing mining at one more mine. Goa is likely to resume production by October or November.

“Though the Goan ore is not used by domestic steel mills regularly, a portion of it could be used by mills like JSW Steel. Overall, the availability of iron ore is comfortable for FY16,” said an analyst tracking the sector.